S & P may downgrade Yukos, Sibneft ratings

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Moscow. (Interfax) - Standard & Poor's Ratings Services may downgrade its ratings for oil companies Yukos and Sibneft. The agency said in a news release it had put the Yukos long-term corporate credit rating of BB on CreditWatch with negative implications. S&P also revised the CreditWatch implications on its B+ long-term corporate credit rating on Sibneft to developing from positive. "The CreditWatch actions reflect our concern that the recent freezing of the 44% stake in Yukos indirectly owned by the company's CEO, Mikhail Khodorkovsky, and several other people raises the risks for creditors by threatening the ownership rights and governance processes of both Yukos and Sibneft," said Standard & Poor's analyst Elena Anankina.

The share-freezing adds to the uncertainty caused by the ongoing legal and tax allegations against Yukos and its core shareholders, as well as by Khodorkovsky's recent arrest. It also raises general concerns about the poor protection of ownership rights in Russia, where the political and legal environment remains opaque and unpredictable, and where enforcement of legislation and regulations appears increasingly selective. "Resolution of the CreditWatch status of both Yukos and Sibneft will require an assessment of the risks to governance, finance, and operations caused by the General Prosecutor's investigation and tactics. We will focus our analysis in particular on the extent of interference with Yukos' and Sibneft's management, and on the companies' ability to control their financial and other assets," Anankina added.

Areas of concern include oil-field licenses; ownership of key operating subsidiaries; tax charges; access to financial markets; liquidity; and any changes to both companies' financial policy and shareholding and management structures.

Upon completion of the merger, the rating on Sibneft will be based on that on Yukos (to be renamed YukosSibneft) and on the standing of Sibneft's creditors relative to those of the parent company.

http://www.interfax.com/com?item=Rus&pg=0&id=5667797&req=

Downgrade? yes, good bet I would say, unless of course they decide to make Ken Lay a director, in which case there may be a sudden reversal of this comic situation...

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1. Addendum: Yukos advisers plan lobby offensive

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Foreign advisers to the crisis-hit Russian oil giant Yukos are planning to lobby Western governments on the firm's behalf, BBC News Online has learned.Yukos chief executive Mikhail Khodorkovsky, is in jail facing fraud and tax evasion charges, and almost half the company's shares were frozen by Russian authorities on Thursday. Many Russians believe the case against Mr Khodorkovsky, thought to be Russia's richest man, is politically motivated. He has funded opposition groups, breaking what analysts say was a tacit agreement to stay out of politics in return for avoiding investigation of his financial affairs. Analysts say the move against Mr Khodorkovsky and Yukos has created the biggest political and economic crisis of President Putin's three years in office.

Investors are reassessing Mr Putin's credentials as manager of one of the world's largest emerging economies while political commentators are interpreting the action as a drive by Kremlin hardliners to suppress political dissent. "He's gone pretty far in tarnishing his reputation," said Andrew Kuchins, director of the Carnegie Moscow Centre think-tank. "It's not beyond the realm of possibility that he turns this around, but it will take a huge stroke of leadership to repair the damage."

According to Stuart Eizenstat, ex-US Deputy Treasury Secretary and member of the International Advisory Board (IAB) to the company that controls Yukos, the board members are preparing to use their influence in Washington, London and Berlin to push for support for Yukos. "We do not see any justifiable legal basis" for the Kremlin's actions, he told BBC News Online. "We are each trying to activate our respective governments."

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More: http://news.bbc.co.uk/1/hi/business/3228715.stm